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FoFA - The Journey

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Jarrod Jeremiah

on 20 October 2015

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Transcript of FoFA - The Journey

FoFA - The Journey
FMDG 7 May 2014

BEST INTEREST DUTY
OPT-IN
SCALED (STAGED) ADVICE
CONFLICTED REMUNERATION
WHO WANTS TO CONTINUE PROVIDING AN SMSF SERVICE?
ASIC Regs
act in best interests of client
provide appropriate advice
warn if advice based on inaccurate or incomplete info
prioritise client's interests
measure is better position
Client better position
what's client position if advice not followed?
subject matter of advice sought by client
client's want to improve their financial position but could also be:
client understands their financial position better

align their financial position with risk appetite

reassurance from review that no product or strategy change required

product features client values provided there's an understanding of cost

client benefit more than trivial
Fees on Financial Products
No asset based fees on borrowed money
Ok on execution only
Asset based fees ok if can be turned off
Upfront and trailing comms and volume based payments gone
Remuneration on Risk
Life risk products outside of Super
Life risk products in Super without investment component
Banned:
Group Life in Super
Life through a default Super ie My Super
http://www.linkedin.com/in/jarrodjeremiah
@JarrodJeremiah
https://twitter.com/JarrodJeremiah

Connect with Me
The Latest
19 Mar 14 - Bill to amend FoFA

- remove section 961B(2)(g) (the ‘catch-all’ provision) from the best interests duty;

- provide a limited exemption for employees on general advice from conflicted remuneration;

- remove the Opt-In requirement;

- amend the fee disclosure regime to operate only prospectively;

- specifically provide for scaled advice; and

- not proceed with the changes to allow commissions on group life insurance inside super where personal advice has been provided.
referred to Senate Econ Legislation Comm for Inquiry - have to report by 16/6
If passed into law, amendments will:
24 Mar - FoFA on Hold
THE END
Current position

FPs who enter into ongoing fee arrangements for more than 12 months with new retail clients (from 1 July 2013) must renew their clients’ agreement to pay ongoing advice fees every two years. (s962A)
19 Mar Proposed Amendment

The Opt-In requirement is to be repealed so that financial planners no longer need to seek their client’s agreement every two years.
Fee Disclosure Statements
Current

An annual fee disclosure statement (FDS) must be given to existing and new retail clients who have entered into an ongoing fee arrangement for more than 12 months
19 Mar Proposed Amendment


The FDS requirement is being amended so that financial planners will
not need to provide fee disclosure statements (FDS) to clients who
entered into an ongoing fee arrangement before the mandatory 1 July
2013 commencement date of FoFA.

19 Mar Proposed Amendment
Remove 7th step catch all provision
6 other steps remain

Enshrined in Law 1/7/13
7 Steps - s961B

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s961b.html
What is it?
s963A any benefit that could be expected to influence the choice of product recommended or the
advice given to clients by a licensee or representative
19 Mar Proposed Amendment
General advice exempted from conflicted remuneration
employee must not have given the general advice to retail client 12 months prior to receiving the benefit
19 Mar cont
Govt to consult with life insurers separately on a range of issues
Government’s solution to Australians’ desire for “piece-by-piece advice rather than holistic or comprehensive advice”. (Source: ASICs Report 224 Access to financial advice in Australia, Dec 2010).
Scaled Advice is pertinent to consumers’ requests for advice on superannuation, as distinct from other aspects of their overall financial circumstances.
How can scaled advice be provided cost effectively to the licensee and to the client?

How detailed or limited can the fact find be?

How can practitioners limit their liability when delivering scaled advice?

What will ASIC and FOS look for when investigating scaled advice cases?
19 Mar Proposed Amendment
Clients and financial planners will be allowed to agree on the scope of financial advice to be provided, whilst ensuring advice is still appropriate for the client.

A new subsection 961B(4A) is being inserted, which states:

To avoid doubt, nothing in this section prevents the provider and a
client from agreeing the subject matter of the advice sought by the
client.

Further a ‘full-fact’ find is not required as the provider need not inquire
into circumstances that would not reasonably be considered as
relevant to the subject matter.

What's your take on setting up an SMSF and rolling over a client's current Super?
By the Numbers
$505,000,000,000

30% - now the largest segment
509,000
30,000 pa
40.8% under 45 new SMSFs
$992,000
19 x
What licensing gives you
Welcome to the world of SoAs

Compliance framework

Advice process

Deeper technical expertise and training

Discover new opportunities to service your client
Full transcript